LPG market

LPG China Market June 2002
The China LPG Market
LPG demand driven by Economic Growth
Economic fundamentals in China are relatively sound. GDP growth has been in excess of 7% pa for the past 10 years and consequently LPG demand has surged by 300% to over 14 mtpa (CAGR of >15%). The forecast is for continued strong growth in both GDP and household incomes which will translate into LPG demand. Consumption per Capita (kg/yr)
USA Japan China Mexico Brazil
LPG Market Potential
191 The China LPG market has grown to become the 3 rd largest market in the world ranked behind the USA and Japan. However, in terms of consumption per capita, China is a relatively untapped market which significantly lags behind the gasification rates of the other top 5 consuming nations. China’s economic momentum is continuing. The 1997/8 Asian financial crisis hardly touched China. The global/US recession of 2001 slowed export growth and tempered Chinese economic growth slightly to an estimated 7.3%. Thus for LPG the outlook is also one of continued growth. Whilst growth rates are not expected to match those of the past, higher income levels and rising urban populations are expected to accelerate the use of cleaner fuels – like LPG & gas.. Against the backdrop of sustained economic growth and low gasification rates industry forecasts ranging from 6-8% CAGR for LPG are considered robust By 2010, the LPG market in China is expected to be ca. 22-25 mtpa thus overtaking Japan to become the second largest market in the world.
150 11 111 42 144 6
50 100 150 200
S. Korea India
0
Domestic LPG Demand (History & Forecast)
30000 25000
k mt/yr
20000 15000 10000 5000 0
19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10
Demand
Low Demand
High Demand
LPG Market within China
LPG Focus Markets
China is made up of a multitude of regional economies and markets. The economic power and growth potential of China is primarily driven by a number of coastal markets where GDP per capita and household incomes are up to 6 times the China average. In terms of LPG these coastal regions also account for 70% of the total LPG demand. The dominance of these coastal economies is repeated across the consumer spectrum and thus the RSS strategy identified these coastal regions as the key focus markets. The LPG market in China is heavily skewed towards residential consumption (cooking, heating) with >80% of all LPG sold in China today being consumed within the household sector. Whilst the fastest growth is expected to occur in the Autogas segment (15%) followed by the Commercial and Industrial sector (7%), residential segment will still account for >70% of total demand by 2010.
Beijing Tianjin Hebei Shandong Jiangsu Shanghai Zhejiang
Guangdong
Growing dependence on Imports
Domestic LPG Prodroduction (History & Forecast)
16000 14000 12000 10000 8000 6000 4000 2000 0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Supply/Demand balance
When the decision was taken to issue BBT licences, LPG imports amounted to 2mtpa or 40% of market demand with refinery production accounting for the remaining 60%. Today the balance between imports and exports remains at ca. 40/60, however, the growth in the total market has meant that imports have risen to a total of 5mtpa in 2001. Whilst evidence suggests that local refineries will shift yields to maximise LPG production in periods of high pricing (relative to crude) the dominant factor driving LPG production is the requirement to meet light oil demand (gasoline, diesel and jet). A recent study of refinery LPG production over the past 5 years has confirmed that the increases reflect plant expansions focused on light oil production and are not related to a drive to produce LPG per se. However, with an average LPG yields of 18% of crude input, expansions focused on meeting light oil demand will not be sufficient to satisfy the growing demand for LPG (CAGR 6-8% pa). A recent development by the Chinese authorities to issue Light Oil imports quotas is perhaps a signal that they do not even expect refineries to keep pace with light oil demand which is a further shot in the arm for LPG importers such as ourselves. Our forecasts indicate that LPG imports will grow from the current level of 4mtpa to a range of between 8-10mtpa by 2010.
k mt/yr
Prod
Low Prod
High Prod
LPG Import (History and Forecast)
12000 10000
k mt/yr
8000 6000 4000 2000 0
19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10
Import Wedge
Low Case
High Case
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